Coverdale Transfer to Grandchild?

Forum|Forum|4 years ago
December 6, 2021
1 reply
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My youngest child, FBO on a 25+ year old E-IRA/Coverdale IRA, will turn 30 soon and will not have any education expenses. The only under-30 family member is a grandchild, niece to the FBO child. Is there a way to transfer those funds to that grandchild without the 10% penalty and ordinary income tax hit?

Is there anyway whatsoever to avoid the penalty and tax?

If not, is there a way to make the tax hit payable on my son’s tax bill (lower tax bracket)?

Not A Product Question

Best answer by Hal_Al

Your grandchild is the beneficiary's niece and that is mentioned at https://fairmark.com/kids-and-college/coverdell-accounts/changing-beneficiary/

"For this purpose, the beneficiary’s family is broadly defined. All of the following are included:

The beneficiary’s child, grandchild or stepchild.
A brother, sister, stepbrother or stepsister of the beneficiary.
A son or daughter of the beneficiary’s brother or sister (in other words, a niece or nephew of the beneficiary).
The father, mother, grandfather, grandmother, stepfather or stepmother of the beneficiary. (Remember, though, the new beneficiary generally has to be under 30 years of age — a very young grandparent!)
A brother or sister of the beneficiary’s father or mother (in other words, an aunt or uncle of the beneficiary).
The beneficiary’s spouse, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law.
The beneficiary’s first cousin."

Critter-3

https://budgeting.thenest.com/can-education-ira-transfer-another-child-29703.html

FlyFisher99Author

I read that before posting my question. Transferring to a child, niece, nephew, etc. is clearly ok. Don't see grandchild mentioned. Doubt it's ok, but posted question hoping someone will have a bright idea.

Hal_AlAnswer

Employee

Your grandchild is the beneficiary's niece and that is mentioned at https://fairmark.com/kids-and-college/coverdell-accounts/changing-beneficiary/

"For this purpose, the beneficiary’s family is broadly defined. All of the following are included:

The beneficiary’s child, grandchild or stepchild.
A brother, sister, stepbrother or stepsister of the beneficiary.
A son or daughter of the beneficiary’s brother or sister (in other words, a niece or nephew of the beneficiary).
The father, mother, grandfather, grandmother, stepfather or stepmother of the beneficiary. (Remember, though, the new beneficiary generally has to be under 30 years of age — a very young grandparent!)
A brother or sister of the beneficiary’s father or mother (in other words, an aunt or uncle of the beneficiary).
The beneficiary’s spouse, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law.
The beneficiary’s first cousin."